Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Zurich Australian Insurance Ltd v GIO General Ltd [2011] NSWCA 47 Hearing dates: 24 November 2010 Decision date: 10 March 2011 Before: Allsop P, Giles JA, Young JA Decision: 1. Appeal allowed. 2. Set aside the orders made on 19 February 2010 that the proceedings be dismissed and Zurich pay GIO's costs. 3. Declare that Zurich is entitled to contribution from GIO for half the amount of $429,360 representing indemnity to Caringbah in respect of injury to Mr McLellan. 4. Order that GIO pay Zurich's costs of the proceedings in the Equity Division and on appeal. 5. Liberty to apply within 14 days for any further relief conformable with these reasons. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: INSURANCE - Double insurance principle - two different insureds entitled to indemnity from two different insurers with respect to separate liabilities for the same injury - contribution between insurers - extended contribution principle in AMP Workers Compensation Services (NSW) Ltd v QBE Insurance Ltd [2001] NSWCA 267; (2001) 53 NSWLR 35 - uncrystallised liability sufficient for purposes of double insurance - second insurer concurred in first insurer indemnifying its insured in the injury - proof of liability of second insurer's insured - first insurer's indemnity discharged that liability - second insurer required to share burden of indemnity - sufficient to declare entitlement to contribution Legislation Cited: Motor Accidents Compensation Act 1999 Workers Compensation Act 1987 (NSW) Cases Cited: Albion Insurance Co Ltd v Government Insurance Office of New South Wales (1969) 121 CLR 342; Allianz Australia Workers Compensation (NSW) Ltd v NRMA Insurance Ltd [2007] ACTSC 2; AMP Workers Compensation Services (NSW) Ltd v QBE Insurance Ltd [2001] NSWCA 267; (2001) 53 NSWLR 35; Bovis Construction Ltd v Commercial Union Assurance Co Plc (2001) 1 Ll R 416; Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282; C E Heath Underwriting Insurance (Aust) Pty Ltd v State Government Insurance Commission (1983) 34 SASR 1; Collyear v GCU Insurance Ltd [2008] NSWCA 92; Costi v Rodwell (1985) VR 287; Dawson v Bankers & Traders Insurance Co Ltd (1957) VR 491; Dering v Winchelsea (1787) 1 Cox Eq Cas 318; 29 ER 1184; The Distillers Co Bio-Chemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1; Drake Insurance Plc v Provident Insurance Plc (2004) QB 601; Drayton v Martin (1996) 67 FLR 1; Edwards v Insurance Office of Australia Ltd (1933) 34 SR (NSW) 88; Emad Trolleys Pty Ltd v Shigar [2003] NSWCA 231; (2003) 57 NSWLR 636; GIO General Ltd v Insurance Australia Ltd [2008] ACTSC 38; Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129; Government Insurance Office of New South Wales v Royal Exchange Assurance of London (1965) 82 WN (NSW) Pt 1 468; GRE Insurance Ltd v QBE Insurance Ltd (1985) VR 83; Legal and General Assurance Society Ltd v Drake Insurance Co Ltd (1992) 1 QB 887; Mahoney v McManus (1981) 180 CLR 375; Mercantile Mutural Insurance (Australia) Ltd v QBE Workers Compensation (NSW) Ltd [2004] NSWCA 409; (2004) 61 NSWLR 655; QBE Insurance (Australia) Ltd v Lumley General Insurance Ltd [2009] VSCA 124; (2009) 24 VR 326; Toll Pty Ltd v Dakic [2006] NSWCA 58; Workcover Queensland v Suncorp Metway Insurance Ltd [2005] QCA 155; (2005) 2 Qd R 210; Zurich Australian Insurance Ltd v CSR Ltd [2001] NSWCA 261; (2001) 52 NSWLR 193; Category: Principal judgment Parties: Zurich Australian Insurance Limited - Appellant GIO General Limited - Respondent Representation: Counsel B W Walker SC & B Hull - Appellant L King SC - Respondent Solicitors: Vardanega Roberts - Appellant Moray & Agnew - Respondent File Number(s): CA 2009/00289682 Publication restriction: No Decision under appeal Citation: Zurich Australian Insurance Ltd v GIO General Ltd [2010] NSWSC 85 Date of Decision: 2010-02-19 00:00:00 Before: Barrett J File Number(s): SC 2009/00289682 Judgment 1ALLSOP P: I have had the advantage of reading the reasons in draft of Giles JA. I respectfully agree with them and with the orders that his Honour proposes. I would only add the following comments. 2The basis for Giles JA's conclusion is not that there was a mistake of fact founding a common law claim for moneys had and received, or restitution. Rather, Zurich, which, on the submissions of both it and GIO on appeal, was the insurer of Tiger in its capacity as owner, paid moneys to the correct claimant, Mr McClellan. That payment discharged Zurich's insured, Tiger, from any liability that had accrued against it at the time of the accident. That payment thereby relieved Tiger's common law insurer, GIO, of any liability that it had to Tiger, given the operation of the Workers Compensation Act 1987 (NSW), s 151E. By the letter of 27 July 2007, GIO agreed with Zurich that the concession of liability by Zurich (that could be founded only on an assumption that Caringbah was an insured of Zurich and so an owner) and that the amount of the settlement were both appropriate. It was and is not part of Zurich's claim to say that that course of agreement between insurers was founded on a common mistake. It is only necessary for it to show, as it has, that (a) the payment discharged Tiger from a liability that it had as owner to Mr McClellan and, on the available facts in the Equity suit, that this relieved GIO from any liability to indemnify Tiger (being GIO's and Zurich's mutual insured) under its (GIO's) policy, which covered the same substantive risk as the Zurich policy and (b) that the circumstances of the payment by Zurich were not such as to impede or undermine the vindication of the equity of contribution between co-insurers of the same risk that arose from the relief of liability of GIO by the payment by Zurich in respect of the mutual insured of those insurers. 3Whether or not any mistake (if there be one) by Zurich (and also GIO) as to whether Caringbah was an owner would give rise to an action in restitution by Zurich against GIO or by Zurich against Mr McClellan or a restitutionary action in equity by Zurich against GIO founded not only upon the mistake (on this hypothesis) but also upon the avoidance of circuity of action need not be explored. Zurich's claim was sufficiently grounded in the equitable right of contribution between co-insurers. 4GILES JA : This is an appeal against dismissal of a claim for contribution on the basis of double insurance. For the reasons which follow, the appeal should be allowed and a declaration of entitlement to contribution should be made. The injury and the liability proceedings 5The Wood family ran buses and coaches through two companies, Caringbah Bus Service Pty Ltd ("Caringbah") and Tiger Tours (Management) Pty Ltd ("Tiger"). Caringbah operated school and timetable services using buses, and Tiger operated coach services using coaches in a different livery. Caringbah attended to registration of all buses and coaches, including the Tiger coaches, and all were registered in its name. 6Mr Ian McLellan was employed by Tiger as a driver. He generally drove a Tiger coach used for coach services, but at times he drove a Caringbah bus or a Tiger coach used for Caringbah's bus services. 7On 13 October 2002, when driving a Tiger coach for a golfing party, Mr McLellan injured his shoulder lifting the heavy bottom-hinged door of a trailer towed by the coach. He sued Caringbah in the District Court claiming motor accident damages under the Motor Accidents Compensation Act 1999 ("the MAC Act"). He alleged that Caringbah was the owner of the coach and trailer, and that the design of the trailer whereby the heavy tailgate had to be lifted manually was a defect in the trailer. He did not sue Tiger, either as his employer or as owner of the coach and trailer. In the District Court proceedings he conceded that he could not recover damages in an action against Tiger if they were assessable under the Workers Compensation Act ("the WC Act"), because he could not prove a whole person impairment of 15 per cent (WC Act, s 151H). 8As the MAC Act then stood, Mr McLellan could recover damages for injury caused by the fault of the owner of the coach in its use or operation if the injury was as a result of and caused during such use or operation by a defect in the coach: s 3, definition of "injury". Use or operation of the coach included use or operation of the trailer attached to it: s 3, definition of "use or operation of a motor vehicle". The heavy tailgate was a defect in the trailer, and there was use or operation of the coach: Zurich Australian Insurance Ltd v CSR Ltd [2001] NSWCA 261; (2001) 52 NSWLR 193; Toll Pty Ltd v Dakic [2006] NSWCA 58. 9"Fault" under the MAC Act meant negligence or any other tort: s 3, definition. Caringbah admitted that it was in breach of a duty of care owed to Mr McLellan, implicit in which was that it was the or an owner of the coach. It admitted that there was a defect in the trailer, and there was no dispute that the breach of duty caused Mr McLellan's injury. Subject to the matter next mentioned, damages were agreed at $352,000, inclusive of workers compensation payments which had been made to Mr McLellan. 10Caringbah relied on s 151Z(2)(c) and (d) of the WC Act, whereby if Mr McLellan was entitled to take proceedings against Tiger, his damages recoverable from Caringbah would be reduced in the manner there stated. It was explained to the judge that - in a notional action by Mr McLellan against Tiger as his employer his damages would be assessed under the WC Act and the damages recoverable from Caringbah would be reduced by 50 per cent because the damages under the WC Act would be nil; in a notional action by Mr McLellan against Tiger as owner of the coach claiming motor accident damages, there would be no reduction in the damages recoverable from Caringbah because s 151E of the WC Act provided that its damages regime did not apply to an award of damages to which Ch 5 of the MAC Act applied; and an action for motor accident damages could not be brought as an action for breach of an employer's duty of care ( Emad Trolleys Pty Ltd Shigar [2003] NSWCA 231; (2003) 57 NSWLR 636). 11The judge was thus required to consider whether Tiger was an owner of the coach, although in the absence of Tiger. Unsurprisingly, Mr McLellan argued for Tiger being an owner of the coach as well as Caringbah. Caringbah did not concede that both it and Tiger could be owner of the coach, but put no argument to the contrary. 12The judge held that Caringbah and Tiger were both owners of the coach. His Honour held that Tiger was exercising possession of the coach at the time and Caringbah was entitled to immediate possession of it, and so that each was within the definition of "owner" in s 3 of the MAC Act. 13There was judgment for Mr McLellan against Caringbah for $352,000 plus costs. Costs were later agreed at $77,360. The total amount payable by Caringbah was $429,360. The insurance and the contribution proceedings 14The appellant Zurich Australian Insurance Ltd ("Zurich") was the third party insurer of the coach. It was common ground in the proceedings that the cover extended to the trailer when towed by the coach, and I will refer only to the coach although the relevant vehicle was the trailer. Under the statutory policy Zurich insured "the owner" of the coach against liability in respect of injury to a person caused by the fault of its owner. 15Zurich conducted the defence of the District Court proceedings as Caringbah's insurer. 16The respondent GIO General Ltd ("GIO") was the workers compensation insurer of Tiger. Under the statutory policy it promised to indemnify Tiger against compensation payments to its workers and any other amounts that Tiger became liable to pay independently of the WC Act for injury to its workers, plus costs and expenses. 17GIO had made workers compensation payments to Mr McLellan in the total amount of $172,834.48. It was entitled to be repaid that sum from the damages awarded to Mr McLellan: WC Act, s 151Z(1)(b). 18Zurich paid Mr McLellan $256,525.52, being $429,360 less $172,834.48. Claiming that there was double insurance, it declined to pay the $172,834.48 to GIO. It brought proceedings in the Supreme Court in which it sought declarations that the principles of double insurance applied and that it was entitled to contribution from GIO; an "order" that it was entitled to retain the $172,834.48; and an order that GIO pay to it $41,845.52, being the balance of half the $429,360, plus interest. Contribution on the basis of double insurance - the extended principle 19Contribution on the basis of double insurance may be claimed when an insured is entitled to indemnity from two different insurers in respect of the same liability. Payment by one insurer benefits the other, and the burden must be shared pro rata. It is sufficient to refer to Albion Insurance Co Ltd v Government Insurance Office of New South Wales (1969) 121 CLR 342 at 345-6 per Barwick CJ and McTiernan and Menzies JJ and at 349-352 per Kitto J with whom Windeyer J agreed. Kitto J explained the basic concept as one of natural justice and, amongst other expressions and citing Dering v Winchelsea (1787) 1 Cox Eq Cas 318 at 321; 29 ER 1184 at 1185, as one "bottomed and fixed on general principles of justice". In Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282 at [22] Gaudron ACJ and Hayne J said that - " ... the doctrine of equitable contribution is founded on concepts of fairness and justice - 'natural justice', as that term was explained by Kitto J in Albion Insurance Co Ltd v Government Insurance Office (NSW) . In this context, 'natural justice' requires that if 'one of several persons has paid more than his proper share towards discharging a common obligation' he is entitled to be recompensed by those who have not." 20Caringbah had been held liable to Mr McLellan in respect of his injury, and as owner of the coach was entitled to indemnity from Zurich against that liability. It had been indemnified as to $256,525.52 by payment direct to Mr McLellan. It may be accepted that, subject to its claim that there was double insurance, Zurich stood ready completely to indemnify Caringbah by payment of $172,834.48 direct to GIO. 21However, Caringbah was not entitled to indemnity from GIO in respect of its liability to Mr McLellan. It was not a case of one insured entitled to indemnity from two different insurers in respect of the same liability. On the judge's holding, there were two different insureds which could each be liable, although for the same injury to Mr McLellan. Hence Zurich invoked an extension of the principle of contribution on the basis of double insurance, relying on AMP Workers Compensation Services (NSW) Ltd v QBE Insurance Ltd [2001] NSWCA 267; (2001) 53 NSWLR 35 ("the AMP case"). 22In the AMP case an employee, Mitchell, was injured by the negligent driving of another employee, Graupner, for whose negligence the employer was vicariously liable. Mitchell sued Graupner, but did not sue the employer. The employer's third party insurance with QBE in respect of the vehicle covered the employer's liability as owner and Graupner's liability as driver. The employer also held workers compensation insurance with AMP, which extended to the employer's common law liability to its workers but did not cover negligent employees such as Graupner. There was consent judgment for Mitchell against Graupner. QBE paid Mitchell, and claimed contribution from AMP on the basis of double insurance. 23Handley JA, with whom Mason P and Beazley JA agreed, held that QBE was entitled to contribution. 24His Honour noted that if Mitchell had sued the employer and obtained judgment for the same amount, there would have been double insurance. He said that AMP contended that it had not insured Graupner, who had been sued, and that the employer, which it had insured, had not been sued and was not entitled to indemnity under its policy. 25His Honour held that the date for determining double insurance was the date of Mitchell's injury, at which time the relevant liabilities arose, not the date when contribution was claimed. The employer was vicariously liable for the negligent driving of Graupner, and they were joint tortfeasors. The employer's liability was potentially covered by both policies, but its rights of indemnity would not accrue until its liability to Mitchell had been "crystallised" (at [9]) by settlement or verdict. This did not occur, because Mitchell sued Graupner as sole defendant. But an insured's choice to claim indemnity from one insurer rather than another should not leave the one insurer with the whole burden; and on the same principle, the choice of the injured party (Mitchell) to sue one insured (Graupner) rather than another (the employer) or both should not leave the whole burden on the insurer of the one insured (Q BE) . There should be contribution by the insurer of the other insured (AMP). 26His Honour said - "24 In this case the employer had double insurance and Mitchell could choose his defendants, but in principle this should make no difference. The insured's decision to claim against one insurer rather than the other or both was not allowed to unjustly enrich the other, but contribution could be enforced so that all would share the burden equally. Similarly the more or less arbitrary decision by Mitchell to sue the driver and not the employer or both jointly should not be permitted to impose the whole burden on QBE to the exoneration of AMP. Both should contribute equally and would have done so if Mitchell had sued the employer or both driver and employer. 25 The contribution principle is based on "general principles of justice" (Albion Insurance at 351 per Kitto J). In my judgment there is no reason in precedent or principle why the right of contribution should be defeated by the existence of a second layer of choice available to another party. In a case such as the present it should not rest with either of the persons who had available choices to exercise those choices in a way which would leave the ultimate burden on one of the insurers without any right of contribution from the other." 27In Mercantile Mutual Insurance (Australia) Ltd v QBE Workers Compensation (NSW) Ltd ("the MMI case") [2004] NSWCA 409; (2004) 61 NSWLR 655 at [11] Handley JA succinctly said - "The AMP case simply extended the contribution principle established since the time of Lord Mansfield where the insured had a choice, to a case where someone else had a choice which also could be exercised to leave one insurer with the whole burden." 28An application for special leave to appeal from the AMP case was dismissed, the High Court saying that "the actual decision .... is not attended with sufficient doubt to warrant the grant of special leave" ([2002] HCA Tran 367). 29The AMP Case was distinguished in the MMI case. In the MMI case an employee was injured in circumstances said to have arisen from the use or operation of the employer's vehicle. He was paid compensation by the employer's workers compensation insurer, QBE, whose workers compensation policy also covered the employer for its common law liability to its employees. The employer held third party insurance with MMI covering its liability as owner of the vehicle for injury to the employee. QBE claimed from MMI contribution to the workers compensation payments made to the employee, contending that the accident created a liability in the employer to the employee for which the employer was indemnified under both policies. 30Handley JA, with whom Beazley and Tobias JJA agreed, held that the extended contribution principle did not apply. The employee had not sued to enforce a common law liability. The payments made by QBE discharged a liability to pay workers compensation and only that liability, which was not insured by MMI. The AMP case was distinguished because - "12 In that case the liability that accrued at the time of the casualty matured into an actual liability or loss. Damages became payable and were paid by the motor vehicle insurer. In the present case any liability in damages that may have accrued on 8 March 1993 has never matured into an actual liability or loss. Damages never became payable and will never be paid. 13 In the events that have happened any liability in damages that arose at the time of the casualty has become entirely theoretical. Although this is the result of the choice of the worker that choice has not operated to place the whole burden of the liability for damages on one of the insurers. The result of his choice is that there is no liability for those damages on either insurer. There is no inequality of burden, and so far as damages are concerned there is no burden at all. The basis for a claim for contribution is lacking." 31His Honour later said - "22 There is also nothing in the AMP case (2001) 53 NSWLR 35 which requires this Court to hold that a right of contribution has arisen in this case. There a liability in damages accrued at the time of the casualty which was covered by both policies. The injured worker brought an action to enforce his right to damages and recovered $450,000 inclusive of costs which was paid by the motor vehicle insurer. As a result of choices made by the worker and his legal representatives the liability which originally had been covered by both policies was crystallised by a settlement which placed the whole burden on one of the insurers, but we held that this did not defeat the latter's right to contribution. Nothing was said which governs the present use [sic: case] where any liability which was originally covered by both policies was never crystallised and the liability that did was not covered by both policies." 32The extended contribution principle in the AMP case has been referred to or considered in a number of subsequent cases. 33In Workcover Queensland v Suncorp Metway Insurance Ltd [2005] QCA 155; (2005) 2 Qd R 210 Workcover insured the partnership of Mr and Mrs White, which employed Carter. Suncorp insured Mr White as owner of the vehicle Carter was driving when he was injured. Carter sued the White partnership. The action was settled. Workcover provided indemnity, and claimed contribution from Suncorp. 34The AMP case was applied in rejecting Suncorp's submission that there had to be identical insureds, and also in rejecting Suncorp's submission that the contribution should be only to Mr White's half share of the partnership liability because it had not insured Mrs White. Jerrard JA, with whom McMurdo P and Douglas J relevantly agreed although McMurdo P dissented in the result, pointed out at [46] that Handley JA had spoken of two or more insurers being on risk in respect of the same loss or liability, and that "that statement of principle does not refer to the necessity for an identical insured, but rather the identical loss or liability". As to the extent of contribution, his Honour accepted that the relevant date was the date of the injury and said at [52] that "on that date the inchoate liability of both the insurers to Mr White existed in full". Douglas J said also at [59] that "each insurer's ... liability was to indemnify their insured to an unlimited extent for the full amount of the damages suffered by Mr Carter". 35In Allianz Australia Workers Compensation (NSW) Ltd v NRMA Insurance Ltd [2007] ACTSC 2 and GIO General Ltd v Insurance Australia Ltd [2008] ACTSC 38 Harper M was "fortified" (at [30] and [26] respectively) by the AMP case in concluding that the way in which the insured person's claim was pleaded - as an unsafe system of work, not negligence in relation to a motor vehicle - was not determinative of double insurance between the workers compensation insurer and the third party insurer. GIO General Ltd v Insurance Australia Ltd was a case of a single insured, and double insurance was found. In Allianz Australia Workers Compensation (NSW) Ltd v NRMA Insurance Ltd the injured employee sued his employer Trueform, insured by Allianz, but the owner of the vehicle under the broad equivalent of the MAC Act was Abbey, insured by NRMA. The AMP case was distinguished as a case in which the employer and the owner were identical, but the more fundamental differences were that Trueform was not insured under the third party policies and that Abbey would not if sued have been liable. 36The AMP case was again distinguished in Collyear v CGU Insurance Ltd [2008] NSWCA 92. It was a case of loss insurance, not liability insurance. Emibarb's interest as lessee of premises and the Trustee's interest as owner of the premises were covered under a Lloyds policy. The Trustee's interest as owner of the premises was also covered under a CGU policy. The premises were damaged by fire. Emibarb reinstated them, as it was obliged to do under the lease. Lloyds paid Emibarb and claimed contribution from CGU. It was held that the relevant risks were not the same. The Lloyds payment had been made in respect of Emibarb's obligation to reinstate the premises, which was not within CGU's cover, and the Trustee had not suffered loss because the premises had been reinstated. 37The time for determining double insurance as held in the AMP case was applied in QBE Insurance (Australia) Ltd v Lumley General Insurance Ltd [2009] VSCA 124; (2009) 24 VR 326, with a qualification as to terminology and leaving open that double insurance might not be determined at the time of the "insuring clause event" where that "would subvert rather than promote the underlying rationale and purpose of the contribution principle" (at [69]). Their Honours' summary of principles at [70] was in terms of two insurers of a common insured, but included - " (c) Other examples of events occurring after the insuring clause event which will usually not affect the first insurer's right of contribution include: (i) a decision by a plaintiff to sue a person who is a joint tortfeasor with the common insured by virtue of the latter being vicariously liable for the former's negligence, and to enforce judgment against the joint tortfeasor in circumstances where the joint tortfeasor is an insured under the first policy but not the second policy; [footnote; the AMP case]" 38None of these cases involved facts similar to the present facts, but no doubt was cast on the extension of the contribution principle in the AMP case. The extension was not questioned in this appeal. As will be seen, GIO submitted that it did not apply on the present facts. The primary judge's reasons 39The primary judge said that he would assume that, as had been found in the District Court, Tiger was an owner of the coach as one of two owners. On that assumption, he accepted at [20] that the cover provided to Tiger by the Zurich third party policy "corresponded to a certain extent" with the cover provided to Tiger by the GIO workers compensation policy. 40His Honour continued - "21 But there was no finding in the District Court proceedings that Tiger Tours was liable on account of negligence or any other tortious conduct towards Mr McLellan. The finding there was that Caringbah Bus, which had the control of the vehicle, was negligent as against Mr McLellan and liable in damages accordingly. The question of any breach of a duty of care owed by Tiger Tours to Mr McLellan as an employee or otherwise did not arise. Given the way in which the District Court proceedings were constituted, there was no occasion for it to arise. 22 Nor can it be found in these present proceedings that Tiger Tours had a liability to Mr McLellan in negligence or otherwise for tort. Neither Tiger Tours nor Mr McLellan (or, as it now must be, his legal personal representative) is before the court - added to which there is simply no evidence of what Tiger Tours did or did not do in relation to the events of 13 October 2002. There is no basis for any finding that Tiger Tours committed 'fault', in Motor Accidents Compensation Act terms, as against Mr McLellan. 23 There was a finding in the District Court that Tiger Tours was "exercising possession" of the vehicle at the time of Mr McLellan's injury. Precisely what that means in terms of acts or defaults of Tiger Tours relevant to any question of negligence or other tortious liability of Tiger Tours to Mr McLellan cannot be known. The finding, whatever its import, cannot, in any event, be the source of any liability as between Tiger Tours and Mr McLellan, since Tiger Tours was not a party to the proceedings in which the finding was made. 24 On no available view of matters can it be seen that Tiger Tours has incurred a liability for damages for negligent or other tortious conduct towards Mr McLellan. There is accordingly no basis for a finding of liability of Tiger Tours to which the Zurich third-party policy responded. It follows that, whatever may be the precise scope of the GIO workers compensation policy, no question of double insurance in relation to any such liability of Tiger Tours arises." 41His Honour observed at [25] that it "seems to be the case" that Mr McLellan's injury arose out of or in the course of his employment by Tiger. He said that if that were established, Mr McLellan would be entitled to compensation under the WC Act from Tiger and the liability would fall within the GIO workers compensation policy. But he said that principles of double insurance would not apply between Zurich and GIO because, referring to the MMI case, liability for workers compensation was not covered by the Zurich third party policy. 42His Honour then said - "26 I return at this point to a fundamental matter that is fatal to Zurich's present claim. It is a matter that was emphasised by Mr King SC in his submissions on behalf of GIO. The position Zurich postulates in relation to Tiger Tours and the insurances protecting Tiger Tours is entirely hypothetical and therefore not relevant to the matter at hand. As the Court of Appeal stressed in Mercantile Mutual Insurance (Aust) Ltd v QBE Workers Compensation (NSW) Ltd (above), questions of double insurance are to be answered by reference to actually crystallised liabilities, not liabilities that might have come into existence if the victim of the casualty had taken some course other than that in fact taken. Here, the only actually crystallised liability is that of Caringbah Bus to Mr McLellan established by the District Court judgment. Mr McLellan did not proceed against Tiger Tours either for damages in negligence or for workers compensation. Nor did Caringbah Bus join Tiger Tours as a co-defendant with a view to sheeting home to Tiger Tours, in whole or in part, liability owed to Mr McLellan. There is no established liability of Tiger Tours and therefore no established liability to which any insurance indemnifying Tiger Tours can possibly be responsive. 27 In short, this case is precisely of the kind described by Handley JA in Mercantile Mutual Insurance (Aust) Ltd v QBE Workers Compensation (NSW) Ltd (above) at [22]: '[A]ny liability which was originally covered by both policies was never crystallised but the liability that did was not covered by both policies.'" 43The primary judge's reasoning was as follows. It had not been found in the District Court that Tiger was liable to Mr McLellan. It could not be found in the Supreme Court that Tiger was liable to Mr McLellan, because neither Tiger nor Mr McLellan were before the Court and there was no evidence of what Tiger did or did not do and no basis for finding fault. It was necessary that there be a crystallised liability, not a liability that might have come into existence if Mr McLellan had taken some course other than that in fact taken, and the only crystallised liability was that of Caringbah to Mr McLellan. There was "no established liability of Tiger Tours and therefore no established liability to which any insurance indemnifying Tiger Tours can possibly be responsive": at [26]. The primary judge was in error 44In saying at the commencement of [26] that he returned to a fundamental matter, the primary judge was referring to a matter he had "noted" at [7], namely - "2. The question of double insurance must be approached by reference to actually crystallised liabilities. Regard is to be had to burdens actually borne, not to what would or might have been the position if the victim of the casualty or his or her legal advisers had made choices other than those they in fact made and pursued to finality. This point is emphasised in the judgment of Handley JA (with whom Beazley JA and Tobias JA agreed) in Mercantile Mutual Insurance (Aust) Ltd v QBE Workers Compensation (NSW) Ltd [2004] NSWCA 409; (2004) 61 NSWLR 655 at [22] where the import of AMP Workers' Compensation Services (NSW) Ltd v QBE Insurance Ltd (above) is discussed." 45With respect, his Honour was not correct in his understanding of the MMI case. It did not lay down that regard was to be had to burdens actually borne rather than what might have been the case if the injured party had made a different choice, or that "questions of double insurance are to be answered by reference to actually crystallised liabilities, not liabilities that might have come into existence if the victim of the casualty had taken some course other than that in fact taken" (at [26]). On the contrary, in the AMP case regard was had to what might have been if Mitchell had made a different choice, and in the MMI case at [22] Handley JA pointed out that it had been held in the AMP case that the fact that the liability had crystallised by a settlement which placed the whole burden on one of the insurers did not defeat that insurer's right to contribution. The un-crystallised liability of the employer in the AMP case was sufficient for double insurance, where the failure in crystallisation was due to Mitchell's choice to sue Graupner rather than the employer although the employer had a joint liability with that of Graupner. Zurich's submissions on appeal 46Zurich submitted that its contribution claim fell within the extended contribution principle of the AMP case. Its primary submission was that the double insurance lay in Zurich's indemnity to Caringbah for Caringbah's liability as owner and GIO's indemnity to Tiger for Tiger's liability as owner (in both cases meaning liability as at the time Mr McLellan suffered his injury). Alternatively, it submitted that if (as GIO submitted) Caringbah was not owner of the coach and Tiger was the owner, the double insurance lay in Zurich's indemnity to Tiger for Tiger's liability as owner and GIO's indemnity to Tiger for Tiger's liability as owner. The alternative submission recognised that Zurich had in fact indemnified Caringbah for Caringbah's liability as owner as determined in the District Court, and had not indemnified Tiger. But Zurich submitted that it had insured the "owner" of the coach, whoever that may have been, and that if Tiger alone was owner of the coach then Zurich's indemnity of Caringbah had nonetheless relieved GIO of its obligation to indemnify Tiger. 47In either event, Zurich submitted, although in the language of Handley JA in the MMI case at [22] the liability which had originally been covered by both policies was crystallised by a judgment which placed the whole burden on Zurich, the burden placed on Zurich by Mr McLellan's choice to sue Caringbah should be shared equally with GIO on which the burden would also have fallen had Mr McLellan chosen otherwise. Zurich's primary submission 48On Zurich's primary submission, there was double insurance because two different insureds (Caringbah and Tiger) were entitled to indemnity from two different insurers (Zurich and GIO) in respect of separate liabilities of the insureds (Caringbah and Tiger each as owner) for the same injury to Mr McLellan. That was the position in the AMP case, where two different insureds (Graupner and the employer) were entitled to indemnity from two different insurers (QBE and AMP) in respect of separate liabilities of the insureds (Graupner as driver, the employer as joint tortfeasor vicariously liable for his negligence) for the same injury to Mitchell. If Mr McLellan had sued Tiger as owner, there would have been double insurance. His choice to sue only Caringbah meant that Zurich provided indemnity. As in the AMP case, it was said, Zurich could obtain contribution from GIO. 49GIO's response was, with respect, rather Protean. I seek to summarise my understanding of its submissions. 50The first response was that there was no double insurance because Caringbah was not the or an owner of the coach, and so it was not liable to Mr McLellan and Zurich's insurance of the owner did not extend to it. GIO submitted that Zurich had shouldered an obligation to indemnify which it did not in truth have, and that - the District Court's holding that Caringbah and Tiger were both owners of the coach did not bind GIO, because neither GIO nor its insured Tiger was party to the proceedings; the holding was incorrect, because in the application of the definition of "owner" in s 3 of the MAC Act they could not both be owner; and the correct position was that Tiger alone was the owner of the coach. 51The second response was initially that there was no double insurance because Tiger's liability to Mr McLellan was not a vicarious liability like that of the employer in the AMP case, and that the AMP case was distinguishable for that reason. It is correct that if Tiger was liable to Mr McLellan, it was liable for its own fault. That is not a difference of principle, but one of proof of Tiger's liability. The second response became that Tiger's liability had not been proved as between Zurich and GIO. GIO submitted that any elements of that liability in the District Court's decision in favour of Mr McLellan did not bind it because neither it nor Tiger was party to the proceedings; and further, that the transcript of the evidence in the District Court put before the primary judge in the contribution proceedings was not evidence of the facts, so that there was no material on which it could be found in the contribution proceedings that Tiger was liable to Mr McLellan. 52GIO submitted that the facts fell within the MMI case rather than the AMP case, because in the AMP case there was no issue over Graupner's liability and the employer had a vicarious liability. It said that in the present case it could not be said that a liability in Tiger "crystallised" at any relevant time. The applicability of the MMI case was not explained, and the submission misunderstood the two cases. Nonetheless, the responses described above must be considered. There is tension between them, because the first response relied for the asserted ownership of Tiger on the transcript of evidence which, according to the second response, was not evidence of the facts. As will appear, the transcript was evidence of the facts. (a) The first response 53In considering Caringbah's entitlement to indemnity, evidence additional to that before the primary judge was put before this Court by consent. The evidence before the primary judge had included a letter dated 27 July 2007 from the solicitors acting for Caringbah in the District Court proceedings, saying that they were "acting in the interests of" Zurich as the insurer of buses registered in Caringbah's name, seeking agreement to concessions in the conduct of the proceedings. The evidence had not included the reply, but only general reference to GIO's solicitors having no objection to "agreements" with Mr McLellan. The additional evidence showed that GIO's solicitors' response to the letter of 27 July 2007 included that GIO - "agrees that it is appropriate that the defendant admit liability and 'defect' with respect to the subject vehicle"; and "agrees to the plaintiff's damages being assessed at as much as $365,000.00, inclusive of workers compensation payments, plus costs". 54It is evident that, although neither GIO nor Tiger was a party to the District Court proceedings, GIO as Tiger's insurer expressly concurred in admission of a liability alleged by Mr McLellan on the basis that Caringbah was owner of the coach, and to damages being assessed at an amount greater than that at which they were in fact agreed. 55Zurich was inclined to agree on appeal that Caringbah and Tiger could not both have been owners of the coach. It is not necessary to decide whether or not that is so, or whether Tiger rather than Caringbah was owner of the coach. 56Neither Zurich nor GIO referred the Court to authority bearing upon contribution where the second insurer contends that the first insurer's insured had not been liable or the first insurer had not been obliged to indemnify the insured. 57Since contribution involves sharing a common burden, the first insurer must establish the liability for which it must provide indemnity under its policy. However, if the liability of the first insurer's insured has been judicially determined or has been the subject of a reasonable compromise, that suffices for contribution, and the second insurer cannot put in issue in contribution proceedings the liability of the common insured. 58That is implicit in, for example, Government Insurance Office of New South Wales v Royal Exchange Assurance of London (1965) 82 WN (NSW) Pt 1 468 at 474; C E Heath Underwriting Insurance (Aust) Pty Ltd v State Government Insurance Commission (1983) 34 SASR 1 at 7; and Drayton v Martin (1996) 67 FLR 1 at 15, and as to compromise reflects the sensible and commercial reality that liability is commonly resolved by settlement and parties should not be required to litigate to a conclusion. It is consistent with the position in cases such as Edwards v Insurance Office of Australia Ltd (1933) 34 SR (NSW) 88, the cases ultimately turning on the policy wording, under which it is sufficient for an insured claiming against one insurer which has wrongly repudiated its obligation to indemnify to prove that the settlement reached with the injured person was reasonable; see also The Distillers Co Bio-Chemicals (Aust) Pty Ltd v Ajax Insurance Co Ltd (1974) 130 CLR 1 at 9-10 per Menzies J and 25-6 per Stephen J, and Costi v Rodwell (1985) VR 287 at 289. Only as an illustration, in the AMP case the liability of Graupner to Mitchell was established by a settlement. 59There is no reason why this should not be so where there are different insureds rather than a common insured. In the present case the liability of Caringbah to Mr McLellan, if Caringbah was owner of the coach, could not be doubted. That it was reasonable for Caringbah (and Zurich acting in its interests) effectively to admit that it was owner of the coach is established by GIO's concurrence in it doing so. The concurrence was not that Caringbah might admit liability and "defect" if it saw fit, with GIO reserving its position, but that it was appropriate that liability and "defect" be admitted. That it was reasonable for Caringbah to compromise the damages at $352,000 is similarly established by GIO's concurrence. 60From the sharing of a common burden, ordinarily the first insurer must also establish its obligation to indemnify its insured. So in Legal and General Assurance Society Ltd v Drake Insurance Co Ltd (1992) 1 QB 887 it was held that an insurer whose indemnity was limited by a rateable contribution clause, but which provided full indemnity, could not recover contribution towards the whole. Dawson v Bankers & Traders Insurance Co Ltd (1957) VR 491 illustrates a first insurer attempting to prove that the injured person was an employee of the insured within the policy in order to establish its obligation to indemnify the insured, and Bovis Construction Ltd v Commercial Union Assurance Co Plc (2001) 1 Lloyd's Rep 416 illustrates the denial of a first insurer's claim to contribution on the ground that, as well as excessive payment by reason of a rateable contribution clause, the insured loss fell within an exclusion in the policy. 61However, in Drake Insurance Plc v Provident Insurance Plc (2004) QB 601 the Court distinguished Legal and General Assurance Society Ltd v Drake Insurance Co Ltd , on the ground that the first insurer was not a "volunteer" as to full payment because it protested to the second insurer against that insurer's purported avoidance of its policy. Rix LJ, with whom Pill and Clarke LJJ relevantly agreed, said at [126] that the payment was not voluntary as against the second insurer "so as to remove the equity for [the first insurer's] prima facie right to recover a contribution from it", and likened the payment to making a reasonable settlement with the insured. 62Such an outcome had been anticipated in GRE Insurance Ltd v QBE Insurance Ltd (1985) VR 83, a similar case of payment in full despite a rateable contribution clause. Murray J and McGarvie J upheld recovery of contribution towards the first insurer's payment in full. Murray J considered that denying contribution would be "inequitable in the extreme" when QBE, the claimant for contribution, had paid in full after GRE had announced its intention to deny liability to the insured, instead of forcing the insured to sue GRE (at 96). McGarvie J said that, when there was "real doubt" whether GRE was liable to the insured and with a natural desire to maintain a high reputation and obtain business, QBE "acted honestly and reasonably in entering into the settlement and making payment"; his Honour referred to QBE waiving reliance on the rateable contribution clause and paying under the contract of insurance, and said - "I regard the considerations of reason, justice and equity which underlie the right to contribution, as requiring GRE to contribute in respect of payments made by QBE beyond its rateable proportion. GRE had agreed to indemnify the insured to the extent of its rateable proportion. The insured could have chosen to sue GRE for that amount. QBE did nothing to impose any liability on GRE towards the insured. The payment by QBE above its rateable proportion freed GRE from liability to the insured for its rateable proportion. In making the payment honestly and reasonably, in circumstances in which it would have been liable if GRE, as it claimed, was not liable, QBE has freed GRE of the liability which in fact it had." (at 102-3) 63Zurich was only obliged to indemnify Caringbah if Caringbah was "owner" of the coach, within the Zurich statutory policy. Presumably Caringbah invoked the Zurich policy, and there is no reason to conclude other than that Zurich thought at the time that Caringbah was the or an owner of the coach: the only question in the District Court proceedings was whether Tiger was also owner of the coach. That Zurich reasonably thought that Caringbah was the or an owner of the coach, and so was entitled to indemnity in respect of any liability to Mr McLellan, is established by GIO's concurrence in effective admission of Caringbah's ownership. 64There is the equivalent of a reasonable settlement with Caringbah. It would not be consistent with the natural justice and general principles of justice on which contribution on the basis of double insurance rests that, having concurred in Zurich shouldering the burden of indemnifying Caringbah as owner of the coach, including "owner" within Zurich's statutory policy, GIO should not have to share the burden. 65GIO's first response does not answer Zurich's claim for contribution. (b) The second response 66To recapitulate, the primary judge said at [22] that it could not be found in the contribution proceedings that Tiger had a liability to Mr McLellan, because neither Tiger nor Mr McLellan was before the court and there was no evidence of what Tiger did or did not do in relation to the events of 13 October 2002. With respect, the first reason was not sound: the absence of Tiger and Mr McLellan from the contribution proceedings would not preclude a liability finding made as between the two insurers for the purposes of the claim to contribution. As to the second reason, the status of the materials before his Honour was clarified on appeal, and there was evidence on which it could and should be found that Tiger was liable to Mr McLellan. 67In its written submissions Zurich submitted that it was beyond doubt that Tiger would if sued have been held liable, and that Tiger was "incontrovertibly liable to Mr McLellan due to its fault causing injury to the plaintiff through a defect in the coach". Apart from the evidence in the District Court, GIO's concurrence in Caringbah's admission of liability and "defect" went some way towards establishing Tiger's liability to Mr McLellan. But it did not go the whole way, since Caringbah's fault did not necessarily mean Tiger's fault. The relevant fault lay in failing to guard against the risk of injury from lifting the heavy tailgate manually, to which knowledge of the defect in the trailer and the risk of injury could be relevant. Caringbah's knowledge was not necessarily Tiger's knowledge. 68The evidence before the primary judge was an affidavit of Zurich's solicitor, Mr Brett Williams, annexing amongst other documents the transcript of the evidence in the District Court and summarising by way of narrative some of the contents of the transcript. A deal of the affidavit was in the nature of submissions, and brought objections to admissibility from GIO. However, counsel for GIO told his Honour that "if Mr Williams makes assertions, you can read them as submissions as long as they are not taken as evidence and to the extent that the real evidence, that is to say the transcript and the exhibits, then what he says will give way to reality [sic]". Counsel for Zurich agreed, and the affidavit was read on that basis. 69The parties' written submissions before the primary judge appear to have treated the transcript as evidence of facts on which his Honour could act, although GIO maintained to the contrary in this Court. The status of the transcript may nonetheless have been left unclear, causing the primary judge to see it only as evidence of what had occurred in the District Court and to say that there was no evidence of what Tiger did or did not do in relation to the events of 13 October 2002. 70The position was put beyond doubt by evidence admitted on appeal by consent. In a letter to GIO's solicitors, Zurich's solicitors asked whether GIO would consent to the tender of the transcript of all evidence in the District Court proceedings "as evidence in these proceedings", and whether it would consent to the tender of the judge's judgment. GIO's solicitors responded, "We consent to the tender of the transcript of evidence and judgment in respect to [the District Court proceedings]" It is clear that the transcript was before the primary judge as evidence of facts on which he could act. It is evidence of facts on which this Court can act. 71On the evidence in the District Court, Mr McLellan and other drivers had complained to Mr Keith Wood and Mr Ronald Wood about the heavy tailgate. Mr McLellan "answered to" Mr Keith Wood, who was his "principal source of supervision", but Mr Ronald Wood also gave him directions on a day to day basis. The Messrs Wood were directors of Tiger, and Mr Keith Wood was its secretary. 72The evidence otherwise established that Mr McLellan's injury was caused in the use or operation of the coach (trailer) by a defect in the trailer. If Tiger was owner of the coach, as GIO contended, there was fault in Tiger, and its liability to Mr McLellan was proved in the contribution proceedings. Zurich's alternative submission 73The submission accepted that Zurich had not in fact indemnified Tiger for Tiger's liability as owner. As in the AMP case, it took the liability of Tiger, for this purpose as sole owner, arising at the date of Mr McLellan's injury. The submission then went - Zurich was obliged to provide indemnity to the "owner" of the coach, whoever that may have been. The owner, whoever it may have been, was undoubtedly liable to Mr McLellan. Zurich provided indemnity (save for the $172,834.48) against damages payable to Mr McLellan on the basis that Caringbah was the or an owner of the coach. Assuming that Tiger was the sole owner of the coach, the incorrect provision of indemnity by Zurich in fact relieved GIO of its obligation, as Tiger's insurer, to indemnify Tiger against damages payable to Mr McLellan. Zurich had a like obligation to indemnify Tiger against damages payable to Mr McLellan, and the common liability was discharged although by the incorrect path of Mr McLellan suing Caringbah rather than Tiger. Zurich in fact relieved GIO from the burden which (on its submission as to owner) lay on GIO. It was within the contribution principle that, having benefited from Zurich's payment, GIO should share the burden. 74GIO did not separately answer this submission, and neither Zurich nor GIO referred the Court to more specific authority bearing upon its correctness. The submission took contribution beyond the facts in the AMP case, where it was not in doubt that Graupner was liable to Mitchell. QBE insured and correctly indemnified Graupner. 75If one leaves aside GIO's concurrence in the course taken by Zurich, this is not just a case of exercise of a choice by Mr McLellan which leaves Zurich with the whole of a burden which also lay upon GIO. The additional factor is Zurich's acceptance, on the present hypotheses of Tiger being the sole owner of the coach an erroneous acceptance and one to which GIO did not contribute, of a burden which it did not have. While it is correct that GIO was relieved of the burden which properly lay upon it, because Mr McLellan would not be able to recover twice over by suing Tiger, there was at the least an element of voluntariness in what Zurich did. Repeating the present hypotheses, it could and should have told Caringbah that the claim made by Mr McLellan was not within its policy, because Caringbah was not an or the owner of the coach. Whether this would have led to Caringbah denying liability to Mr McLellan and Mr McLellan turning his attention to suing Tiger is a matter for speculation. 76There arises the caution expressed by McHugh J in Burke v LFOT Pty Ltd at [44]-[45], that contribution between co-obligors "will [not] apply merely because the claimant's payment has benefited or relieved the other party financially". While it has been said that the operation of the contribution principle in a case of contribution between co-sureties "should not be defeated by too technical an approach to the question whether a surety has paid the creditor" ( Mahoney v McManus (1981) 180 CLR 375 at 378 per Gibbs CJ), and the same would apply to other questions in the application of the principle, the expression of caution was taken up in the reasons of French CJ and Gummow, Hayne and Bell JJ in Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129 at [48], their Honours having said at [39] that - "[t]he equity to seek contribution arises because the exercise of the rights of the obligee or creditor ought not to disadvantage some of those bearing a common burden; the equity does not arise merely because all the obligors derive a benefit from a payment by one or more of them. As explained in United States authority, contribution is an attempt by equity to distribute equally, among those having a common obligation, the burden of performing it, so that without that common obligation there can be no claim for contribution." 77In the absence of more full submissions, I would prefer to leave for another occasion whether, in the absence of GIO's concurrence in the course taken by Zurich, the relief in fact of GIO's burden by provision by Zurich of indemnity to Caringbah against a liability of Caringbah to Mr McLellan, when there was no such liability and no obligation to indemnify but there would have been liability and obligation had Mr McLellan sued Tiger, entitles Zurich to contribution from GIO. It may be that would take the contribution principle beyond the confines of legal structures of which the plurality spoke in Friend v Brooker at [47], and be what was there described as no more than an idiosyncratic exercise of discretion. 78If there be added in GIO's concurrence in the course taken by Zurich, the alternative submission is a different expression of the equity between Zurich and GIO which I have accepted in the consideration of the primary submission. That is sufficient for entitlement to contribution. The result 79There was no submission that contribution should not be equal. Although as a practical matter the $172,834.48 would ordinarily be paid by Zurich to GIO, under s 151Z(1)(b) of the WC Act, Mr McLellan had the obligation to pay that sum. The strict position is that Caringbah must pay $172,834.48 to Mr McLellan and Zurich must indemnify Caringbah, and Mr McLellan must pay $172,834.48 to Tiger and Tiger will repay GIO. It would not be correct, therefore, to declare that Zurich is entitled to retain the $172,834.48. 80I do not doubt that Zurich and GIO will act in accordance with this Court's decision, and it should be sufficient to declare that Zurich is entitled to contribution from GIO for half the $429,360; but there should be liberty to apply in case there is good reason for further relief. Orders 81I propose the declaration and orders - 1. Appeal allowed. 2. Set aside the orders made on 19 February 2010 that the proceedings be dismissed and Zurich pay GIO's costs. 3. Declare that Zurich is entitled to contribution from GIO for half the amount of $429,360 representing indemnity to Caringbah in respect of injury to Mr McLellan. 4. Order that GIO pay Zurich's costs of the proceedings in the Equity Division and on appeal. 5. Liberty to apply within 14 days for any further relief conformable with these reasons. 82YOUNG JA : I agree with Giles JA. ********** Amendments 29 March 2011 - Substitute "GIO" for "QBE". Amended paragraphs: 47 29 March 2011 - Substitute "GIO" for "QBE". Amended paragraphs: 47 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 March 2011